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Coordinating Funding for Humanitarian Emergencies

The cat is out of the bag—we are running out of money to pay for the world’s humanitarian needs. Fortunately, it is now in front of us, refusing to be ignored. For that we have United Nations Secretary-General Ban Ki-moon to thank, as it was his decision to appoint the High-Level Panel on Humanitarian Financing, tasked with finding solutions to the challenge of funding humanitarian action.

And what did our nine-member panel find? The cat was probably never in the bag in the first place. For decades, humanitarian financing has staggered forward on a wing and a prayer, susceptible to the vagaries of political fashion, the public mood and a legion of factors that should have no place in determining the fates of the 125 million children, women and men who today rely on goodwill to make it through to the next sunrise. For too long we have been in denial about this state of affairs.

Over many months we spoke with hundreds of people working in what some call the global humanitarian system, others the aid industry; there is no consensus on how to define this complex system of aid. What emerged most prominently in the dialogue was a frustration with the status quo and an urge to find a sustainable funding model.

One of the first problems we encountered was that the true scale of the funding gap could not be established with any degree of certainty—a fact that astonished a panel that includes economists and financiers. We encountered deep suspicion among donors that humanitarian organizations have for years been inflating figures in a bid to compensate for funding gaps. In effect, the organizations anticipated that their calls for a certain amount of money would fall short. For example, a $100 million appeal would usually only be met with a $60 million response. Wherever and whenever we looked for reliable figures reflecting the full extent of the funding chain, from donors to the people needing the basic survival package of food, water and shelter, we came up against opacity.

Thus, we defined the gap ourselves, using the accepted global standard of $1.25 per day per person as the bottom line to survive. We came up with a gap of $15 billion between the estimated present level of need and the amount of financial resources available on an annual basis. Depending on where one is standing, this sum is either huge or minuscule, or it may fall somewhere in between. The world spends around $25 billion a year on humanitarian assistance, which is 12 times more than 15 years ago.

Globally, we have never been more generous, raising record-breaking sums year after year. Tragically, however, we live in times when our generosity has never been less sufficient to meet the challenge. To put the $15 billion gap in perspective, let’s remember that the world produces $78 trillion in combined gross domestic product. We collectively spend as much on chewing gum as we do on humanitarian aid. In 2014, the world’s military spending amounted to $1.7 trillion.

Our starting point was the simple, undeniable fact that in our resource-rich world, no one should have to die or suffer indignity for lack of adequate humanitarian funding. From there we broke the problem down into three areas: 1) shrinking the needs in the first place; 2) finding new, dependable, long-term and predictable funding streams; and 3) making each and every dollar raised work to its maximum effect.

We recognized that the best way to deal with growing humanitarian needs is to address their root causes. Evidently, this requires strong determination at the highest level of global political leadership to prevent and resolve conflicts and to increase investment in disaster risk reduction (DRR). This is especially the case in the most vulnerable communities and countries. Since development is the best resilience-builder of all, we concluded that the world’s scarce resources of official development assistance (ODA) should be used where it matters most—in situations of fragility.

Beyond focusing on the use of ODA in fragile countries, and in countries experiencing shocks due to conflicts in their surroundings or to natural disasters, we need a strong commitment to systematic investment in resilience-building. This includes dedicated funds for peacebuilding and conflict resolution at the international level. For this reason, we endorsed the recommendation of the Secretary-General’s Advisory Group of Experts on the Review of the Peacebuilding Architecture to put 1 per cent of core funding allocated to peace operations from assessed contributions of the United Nations Member States into the United Nations Peacebuilding Fund.

As a panel, we ruminated over making humanitarian aid funding, for the first time, an object of core funding from the same pool as that of Member States’ assessed contributions. While we agreed that this was desirable, we wanted to remain focused on proposing solutions with a genuine possibility of success. Unfortunately, it is clear that it would take years, even decades, for such a proposal to be accepted.

To return to practical and implementable solutions, we proposed that countries at risk of natural disasters should have emergency reserve funds and dedicated DRR budget lines for risk-reduction activities and for receiving funding when disasters hit. Countries hosting refugees should integrate displacement into their development plans and obtain predictable and adequate international support. There should also be a realignment where we follow the people in need—not the countries—by reclassifying the eligibility criteria for the International Development Association, thereby giving middle-income countries access to its grants and low-interest loans.

We called for an end to the short-termism of annual—and retrospective—fundraising by bridging the humanitarian-development divide with programming based on joint analysis. For too long the development and humanitarian sectors have practiced what is at best a benign neglect towards one another. It is time to overcome this divide. Vulnerable people can thus become self-reliant, being helped seamlessly by humanitarian organizations with higher capacity to operate in volatile environments, and by development organizations with longer-term funding horizons and greater capacity to support economically viable activities.

Insufficient funding for humanitarian aid means not only more suffering but also more global instability. Helping people in distress is morally right but it is also in the interest of those who support aid. Today’s massive scale of instability and its capacity to cross borders, vividly demonstrated by the refugee crisis in Europe, makes humanitarian aid a global public good that requires an appropriate fundraising model. In an interconnected world we need solidarity funding capable of crossing borders.

There is an over-reliance on a small group of ODA donors. While they remain very important and are encouraged to do more, we are heartened by those emerging donors who act on the premise that with greater wealth comes greater responsibility. States that are appropriately credited and recognized for their contributions to humanitarian aid will respond generously. There is a need to better reflect the full contributions of all States to humanitarian action.

Beyond Governments, the humanitarian community must harness the power of business to deliver its key skills and capabilities. Business is still a modest factor in humanitarian activities, yet it has the creativity and capacity at the scale to provide new solutions to risk management, support aid delivery, create jobs, and modernize transparency and accountability. Involving staff in humanitarian action is also motivational, and companies need to be encouraged to get involved in providing their relevant skills and capacity—from insurance and digital cash to logistics and telecommunications—for delivering life-saving assistance.

We believe that the time has come for innovative investment in humanitarian action that leads to long-term social improvements. Given that the vast majority of conflict-affected populations are living in Muslim countries, we feel that the role of Islamic social finance is particularly important. Social impact bonds (sukuk, in Arabic) and microlevies on corporations with high-volume transactions have great potential. Work is ongoing to address how Islamic social finance instruments such as sukuk bonds can be channelled effectively and efficiently to meet humanitarian needs. The potential certainly exists for Islamic social finance to provide solutions.

As mentioned at the beginning of this article, we, in the course of our work, noted and concurred with a widely shared view that systemic change in humanitarian aid delivery is needed in order to raise new money and use it more effectively. The reason for this is that greater efficiency will create a virtuous circle by drawing in more funding. We have therefore called on donors and implementing organizations to come together in a “Grand Bargain”. The work is ongoing and we hope and expect that it will be unveiled at the first World Humanitarian Summit, to be held in Istanbul in May 2016.

What would a Grand Bargain succeed in doing? Donors would not simply give more but give better by being more flexible, and aid organizations would reciprocate with greater transparency and cost-consciousness. The elements of a Grand Bargain include provision of more cash-based assistance, where appropriate, and recognition of the comparative advantages of local, national and international implementing organizations for delivery of services.

We want donors to commit to more multi-year funding and less earmarking, since flexible funding is the life-blood of humanitarian operations. Donors should simplify and harmonize their reporting requirements, leaving aid workers more time to perform their life-saving activities. There is also a critical need for greater transparency from implementing organizations, so that everyone can “follow the money” on its journey from donors to the people in need. A global platform to provide open and transparent data would help reduce transaction costs and increase effectiveness.

By committing to joint needs assessments, such as those we have seen carried out in northern Syria and in the aftermath of the 2015 Nepal earthquake, humanitarian organizations would increase donors’ trust. True transparency is within our grasp thanks to digital technology, and this should be extended to include communities receiving aid. Humanitarian organizations can learn and improve by listening to the people they serve.

During our research we saw far too much evidence of “turf wars”, leading to wasted energy and resources through multiple, competitive inefficiencies. If we are to move towards a model of collaborative efficiency, we need government donors and aid organizations to agree to this Grand Bargain. By doing so, they will clearly demonstrate a common commitment to the greater good.

Success in making the necessary changes to put the cat back in the bag depends on the will of many to carry such changes forward. As a Panel, we have been honoured by the Secretary-General to serve and we remain committed to offering our help in making these proposals a reality.